Antique Pocket Watch Howard

Selling on Ebay – Do I pay taxes? Facts about tax obligations

Is this a hobby or are you negotiating?

If you regularly sell things on Internet auction sites like eBay, you may need to consider the questions "Do I pay taxes? "and" Am I Trading? "

What may have started as a hobby can be rapidly expanded to become a much more profitable and this article was written to try to help you understand how HM Revenue and Customs (HMRC) would be interested your online activities.

If you had a clear objectives, are some undesirable elements and decided to sell, then you will probably not need to pay tax. To pay the tax on goods you sell, or trade or be a capital gain.

So your next question should be "Am I Trading?"
Basically, a trade is a two-way relationship between a merchant and a customer. Vendors provides goods or services and the customer pays in general for the goods or services. In addition to this HMRC provide a list of nine indicators that were identified by courts to decide whether a trade exists. For a basic rule of thumb test HMRC considers that you are trading in the following circumstances:

You are trading if you:

• sell products you have purchased for resale
• make articles yourself and sell them, intending to make a profit
• sell (or buy) property on behalf of others for profit (Eg commission)
• provide a service and receive payment (if in cash or in kind).

If you can tell yes to any of these statements, you should consider using the services of a target = "" Accounting> _blank ensure that you do not fall within the scope of HMRC, because if you are trading, you may have to pay tax and national insurance contributions (NIC) and Value (VAT).

HMRC do not consider you a trader if you:

• occasionally sell, unwanted personal belongings through Internet auctions or classified ads
• attend a flea market once a year to sell unwanted household items.

You should, however, consider that even if you can not be regarded as a trader and therefore not liable to tax on income from sales, you can still be subject to taxes on another. If you are unsure, you should talk to a target = "_blank"> book or contact the HMRC helpline.

If you decide that you're in business and that you are liable to income tax, national insurance contributions or VAT, you must notify HMRC within certain deadlines.

The first deadline is for your National Insurance Contributions (NICs) and you must tell HMRC within 3 months from the date you started trading. Regarding income tax, unless you receive a tax return, you have until 5th October following the end of the tax year (A fiscal year runs from April 6 to April 5 next year).

For example, you have started trading on June 20, 2009. You would while September 20, 2009 at HMRC say so you can start repaying your network card. You will then have until October 5, 2010 to report your income for tax purposes.

HMRC impose penalties for not registering in a timely way and not paying your taxes. If you have any doubts about your liability, then you should contact your accountant.

If your business is a supply of goods in the UK you must register for VAT if the value of taxable property will exceed the annual threshold for VAT registration in a period of 12 months.

The threshold current registration 2009/2010 is £ 68,000.

Companies can also choose to register on a voluntary basis, however, before making this decision it is wise to discuss with your accountant or HMRC is to understand the implications of such action.

After reading what you've decided you are no negotiation, but you should ask yourself if you make a capital gain and therefore whether you will be responsible for Capital Gains Tax (CGT)

You could achieve a gain when you sell or give an asset for more than it costs. If you are responsible for the CGT, it is the gain that is taxed, not the amount you receive. Most assets that often give rise to the CGT land, shares and antiques.

There are certain types of property are exempt the CGT, for example:

• personal effects or property (called "property") which are individually worth less than £ 6,000 if you have them
• Private cars

And you only pay if the CGT

• Your Total Earnings taxable for the year are more than £ 10.100 2009/2010.

The aim of this paper is to give you some basic information online sale information and it is far from exhaustive. You should, after reading this, have a pretty good idea if you're just selling a few items side or if you have climbed the ladder and can now be classified as a "professional. If you've done that climb the ladder, it is important you do things correctly. The argument of "I did not realize" holds little water with HMRC and the penalties and interest charges can add up quickly, denying any profit you have made. Our advice would be to use a book such as target = "_blank"> net accountants to ensure that you are trading in the most efficient tax.

Am I trading?

Example 1:

Susie is on maternity leave and decided to have a clear cabinets. She found some old documents and some other pieces she no longer wants. She decides to put on an auction site. Susie made £ 125 and excited by what she allows some more cabinets are other undesirable elements. Over the next few weeks Susie made another £ 230.

Susie is not commercial. There is nothing commercial about it. His original purchases were for personal use and sells items that has owned for some time. None of his personal items were individually valued at more than £ 6,000 when sold. They are exempt of the CGT as "property".

Example 2:

Katie loves making jewelry in her spare time. It makes the items and use them as birthday and Christmas gifts for friends and family. Sometimes a friend will ask him to do a song and Katie will simply charge for materials. A friend of Katie suggests it should make songs and try to sell them on internet auction site. Katie is a dozen pieces and puts them at auction. Each Item cost him about £ 5 to do and they all sell for between £ 20 and £ 40 each. Katie takes the money she has and buys more materials and in a few weeks, it sells for between 5 and 10 pieces of jewelry a week, killing at least 50% profit on each item.

Katie first sales of jewelry to friends are not classified as commercial. This lack of marketability and it does not seek to make a profit. The occasional sales are a byproduct of his hobbies. Once it starts to auction her jewelry, she moved into the areas of marketability.

She is always selling at a profit. She will need to inform HMRC Documents about his business, and keep all his transactions. Its current level of sales indicate that the potential turnover is well below the threshold of VAT annual £ 68,000 if Katie does not need to register for VAT at this time.

Example 3

John bought a new house and visited flea markets and auction houses to buy some furniture. While at a flea market, he spotted a piece of pottery that thought it might be fruitful. John bought three pounds, then put on an auction site where it sold for € 75. Encouraged by what John thought he might be able to make a little money to buy things car boot sales, then on sale. Over the next 12 months John found a number of items, including pottery, first edition books and antiques. John pays a total of £ 55 for all points but sells for £ 425.

John is clearly commercial. The whole enterprise has an air of commerciality. He must inform HMRC's activities, and it should be kept a register of all income and expenditure to help fulfill its first tax return. The level of sales will not exceed the VAT threshold of £ 68,000 if John does not need to register for VAT.

Example 4:

Sarah inherited a gold pocket watch from his grandfather. It is valued at £ 25,000. Sarah keeps watch for 10 months, but then decides to sell to finance his university studies. The pocket watch is sold by a reputable specialist auction house (during the fiscal year 09/10) and gets the £ 48,000.

Sarah did not buy the watch for resale for profit and is not commercial. There is no commerciality of the transaction. However, the watch is worth more than £ 6,000 when sold, and is not free Capital Gains Tax (CGT).

Because Sarah has sold the watch for more than its value when it has inherited, and made a taxable gain more than £ 10,100, it will be liable to CGT.

Disclaimer

The content and advice for information purposes only. Last Updated 14/10/2009 For the latest information and advice, depending on your particular circumstances, Please contact us. We can not be held responsible for actions taken regarding the content on this site.

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Clocks: E. Howard & Company #61 Astronomical Standing Clock